Rethinking Humanitarian Catastrophe Bonds - White Paper
Organisations must build the foundations of a comprehensive risk financing strategy in order to make informed decisions on how to engage with capital and insurance.
Global Parametrics, part of CelsiusPro Group, has published a whitepaper on humanitarian catastrophe bonds. The white paper calls for a comprehensive assessment of risks and organisational objectives to justify cat bond adoption in a humanitarian environment.
Key findings include:
Humanitarian needs are rising faster than available resources. This, among other things, is driving increased interest among humanitarian organisations in exploring catastrophe bonds.
The cat bond structure is mature and replicable across different triggers and territories. Nevertheless, sovereign cat bonds are not necessarily easily adapted to humanitarian settings.
Once a humanitarian organisation has built the foundations of a comprehensive risk financing strategy, it may be in a better position to make informed decisions on how to engage with capital (and insurance) markets to ensure the best protection.
"Cat bonds may well play a role in the humanitarian finance toolkit but they may not be the first port of call and could be explored once the foundations of a comprehensive risk financing strategy are in place. Building this strategy first can ensure humanitarian organisations are ready to proactively engage with capital (and (re)insurance) markets when the time, and rationale, is right,” said Mark Rueegg, Chief Executive of CelsiusPro Group.
Humanitarian organisations are starting to adopt climate- and disaster-linked insurance to build more efficient responsiveness in their operations. With the frequency and severity of climate-related events increasing, there is now a growing interest in exploring the potential of cat bonds to support emergency support as humanitarian needs outpace available resources. In 2024, an estimated 300 million people needed humanitarian assistance.
“Cat bonds are one part of a suite of financial instruments, and an optimal combination of these instruments is how many humanitarian organisations are financing emergency response and recovery,” said Simant Verma, Disaster Risk Finance and Insurance Principal and whitepaper author. “With increasing frequency and severity of climate-linked hazards, cat bonds may play a part in finding a sustainable solution to the problem of humanitarian financing. But humanitarian organisations may consider all their merits, and these should include a range of other options.”
Read the Full White Paper - By Simant Verma, Global Parametrics
